University - Year 2

Accounting

EXERCISE 4

Grateful Company provided the following transactions:

JUL 1 The entity assigned P500,000 of accounts receivable to its bank on a non-
notification basis in consideration for a loan. On this date, the bank
advanced P400,000 less a service charge of 2% of the total accounts
assigned, and the entity signed a promissory note bearing interest of 1%
per month on the unpaid loan balance at the beginning of the month.
Jul-01 Accounts receivable - assigned 500,000
Accounts receivable 500,000
Cash (400,000-10,000) 390,000
Service charge (2% x 500,000) 10,000
Note payable - bank 400,000
AUG 1 Collected P330,000 on assigned accounts. The entity remitted this amount
to the bank in payment first for the interest and the balance to the
principal.
Aug-01 Cash 330,000
330,00
Accounts receivable - assigned 0
Interest expense (1% x 400,000) 4,000
Note payable - bank 326,000
330,00
Cash 0
SEP 1 Collected the remaining balance of assigned accounts. The entity paid off
the remaining loan balance.
Sep-01 Cash 170,000
Accounts receivable - assigned 170,000
Interest expense (1% x 74,000) 740
Note payable - bank 74,000
Cash 74,740
Required: Prepare journal entries to record the transactions.